The GST increase on 1 October is going to have a lot of consequences, from the price of stamps going up, to schools struggling to work out how they will pay for an additional costs. Marcus Ganley, the Labour Candidate for Lambton Ward of the Wellington City Council has drawn another matter to my attention in his recent post.
The Wellington City Council has sent out a note to ratepayers suggesting that one way they can avoid the GST increase is to make their next three rate payments before the 1st of October. A nice idea, but many Wellington ratepayers are struggling to make one payment at the moment, let alone, as Marcus says three payments in the next seven weeks.
Not only will many people struggle to find the extra money, it won’t save them anything anyway. If your rates are say, $1600 per year, then the payments are $400 each, and you would pay $1,200 in advance. The GST on $1,200 is $150 at the old rate (12.5%), or $180 at the new rate (15%). So you save yourself $30 by paying early.
But if you have to borrow money (for example, on an overdraft) to make that early payment, then at an interest rate of 5%, you would pay $45 in interest ($1,200 * .05 * .75).
Even if you don’t have to borrow money to make the extra payments, then the time value of money tells us that the cost to you is about $45. Your net loss is $15.
It’s not a nice idea at all. It’s a nasty, money grabbing idea, made even nastier by the WCC pretending that it’s just giving ratepayers some handy advice. The Wellington City Council will get its money early, which means it can earn interest on it, and ratepayers who pay early will lose money.
Maybe the WCC could offer the phone number of a few finance companies along with this advice?
Has anyone asked Tory Kerry if she will be taking her own advice to rort the taxpayer and pay in advance?
It is an option that is all and good on the WCC for offering this.
Of course you fail to mention the Tax cuts that we will all enjoy effective 1 October. As TV3 proved last night everyone in their sample (high income to low income) will be better off as a result of the tax cuts even with the GST increases.)
And as for Goff saying he will make GST exempt on fresh fruit and Veg – well that is plain stupidity. The average family spends $10 to $40 pr week on fresh fruit and veg. The difference in GST 12.5% to 15% will make a difference of less than $1.00 per week. Taking off the GST would only be save about $5.00 per week. But here is the clincher – How do you know that that benefit will even be passed onto the consumers? My guess is that the average family will not even see the benefit of the GST being taken off. The kilo of apples that costs say $1.99 per kilo will still cost $1.99 per kilo regardless of whether or not there was GST.
I sometime wonder about the stupidity of popularist policies that Labour come up with such is your desperation in the polls.
I don’t tend to take my tax advice from my local government organisation… Lol…
Labour commissioned the Shand report on land rates which said, correctly, that the rating system was unsustainable.
What was done from that?
@Monty, will we better off when the projected inflation of 5.9% next year erodes our saving and purchasing power..? Hmm..?
Jeremy – this is a very long stretch of the bow for Labour flunkies to complain about inflation and the impact on household income – especially when with no GST increase or ETS inflation hit 5.2% in the 2008 year. This was as aresult of the poor economic management of Labour. This spike is a on off and is fully understood and controlled. Is that the best you have?
Look at the polls and just see how the public is reacting to the positive the economic policies of the National Government. I think the last set of polling still had the Nats with over 50% support – as it has been for the past 20 months.
@ Monty, that’s an interesting market theory. Labour removes GST and retailers maintain prices to pad their margins. Tories add GST and retailers maintain prices by cutting their margins. I’m sure the MSM will buy that.
Grant – do Schools not claim back their GST?
I think people are responding by going to Australia, yeah? Especially since our wage gap with them is increasing?
Also – you keep banging on about the GST increase – all the time forgetting to mention people get to keep more of their money.
Even if its a little – people still have more $ at the end of the week.
ohhhhh – the rich watch language Trevor get more back – well – yes, but they are also paying far more than most already. You keep on banging on about keeping talent in NZ – well here is an idea – lets not tax them till their eyes bleed. and they may stay.
This is a good thing – people are better off – remember rent and home loans (the two big expenses) dont incur GST.
@ Trevor – I was only using Michael Cullens term
and I should mention that the same term has used plenty of times by the left leaning members on here (as a quick google shows).
Found this today, not all may be relevant to NZ but you get the point.
Tax his land,
Tax his bed,
Tax the table
At which he’s fed.
Tax his work,
Tax his pay,
He works for peanuts
Anyway!
Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.
Tax his tobacco,
Tax his drink,
Tax him if he
Tries to think..
Tax his car,
Tax his gas,
Find other ways
To tax his ass.
Tax all he has
Then let him know
That you won’t be done
Till he has no dough.
When he screams and hollers;
Then tax him some more,
Tax him till
He’s good and sore.
Then tax his coffin,
Tax his grave,
Tax the sod in
Which he’s laid.
When he’s gone,
Do not relax,
Its time to apply
The inheritance tax.
Accounts Receivable Tax
Airline surcharge tax
Airline Fuel Tax
Airport Maintenance Tax
Building Permit Tax
Cigarette Tax
Corporate Income Tax
Death Tax
Dog License Tax
Driving Permit Tax
Environmental Tax (Fee)
Excise Taxes
Local Body Tax
Unemployment (UI)
Fishing License Tax
Food License Tax
Gasoline Tax (too much per litre)
Gross Receipts Tax
Health Tax
Hunting License Tax
Hydro Tax
Inheritance Tax
Interest Tax
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Mortgage Tax
Personal Income Tax
Property Tax
Poverty Tax
Prescription Drug Tax
Provincial Income and sales tax
Real Estate Tax
Recreational Vehicle Tax
Retail Sales Tax
Service Charge Tax
School Tax
Telephone Tax
Telephone , Provincial and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Vehicle License Registration Tax
Vehicle Sales Tax
Water Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax
This is a good thing – people are better off – remember rent and home loans (the two big expenses) dont incur GST.
yep. but do you know what do? power and gas.
@ Bryce – what Im pointing out is that a large porton (majority?) of after tax income is spent on items not incurring GST – so you are only talking small $$ – and (as proven) less than the increase in their tax reduction.
We won’t even notice the extra 2.5%. What really worries me is when there are fewer of us taxpayers than beneficiaries, public servants, politicians, local body staff and all the others we poor workers support. How on earth is this little group going to be able to keep on paying for them all?
Auckland has done the same thing
I’m going back to David Harvey and my tin foil hat now:
“Yet there appears to be little appetite for such discussion, even among the left. Instead we continue to hear the usual conventional mantras regarding the perfectibility of humanity with the help of free markets and free trade, private property and personal responsibility, low taxes and minimalist state involvement in social provision, even though this all sounds increasingly hollow. A crisis of legitimacy looms”
@Bryce – I am agreeing with you by and large, but you said “yep. but do you know what do? power and gas.” and I have to ask what you mean by gas? The American meaning – i.e., petrol or the (former)NZ meaning – domestic fuel? It’s confusing for people like me when some New Zealanders use words in the American sense (perhaps most) and others use the proper meaning…
@Bryce,
Sorry, I am *NOT* actually in agreement with you after all… Monty, dear, aren’t just a wee bit gullible? Do you really think Campbell Live would have shown any family that was in fact going to be worse off? The range they showed – a single man on $100,000 to a man on $37,000 doesn’t actually reflect the real world… A more realistic range would have been a high of $80,000 to a low of $25,000 and furthermore, people with families!
Deb
@deb, I meant natural gas. My bill continues to climb in an alarming fashion. For what it’s worth, I am in agreement with your last post.
@ Debbie – and they all would have still been better off as well.
and yes – Cambell live would have shown people if they were worse off – it would have made better telly.
I think you are just seeing issues / problems that just are not there.
Come End of Oct people will be either thinking – what was the issue – they cannot see any change – or yay – more of my hard earnt money in my pocket.
You are going to have trouble convincing people that they are worse off when they dont actually see it.
Also 0 I had to LOL at the ‘poor’ family – did you see the size of their music and DVD collection – HUGE !!!
Debby – Campbell is an avowed socialist – I am sure that he would have been disappointed that no family was worse off. What that item proved is the lie that people will be worse off after the tax cuts (which Labour ignore) and the GST increases. The calculator that is provided clearly demonstrates haw much better off most people will be. I understand how annoyed the left will be that this item even went to air – but there is no hiding from the truth. People will be better off under National (ahh that sounds like music to my ears)
@Monty, ha ha, that’s the first time I’ve been called a Labour flunkie, I’m usually being called a neo-con…
You stated after GST we would be better off as the tax cuts would more than offset the GST increase, however they will not offset all of the cost increases from the ETS and more shockingly the inflation rate over the next 12 months of 5.9%… You are demonstrably wrong…
Polls really have no bearing on whether that is the reality or not…
But it’s all part of Key’s grand plan !
That is if they have one !
What next? A “Community Charge”?
I think this solution is going around the problem and not tackling it but since labour is not the ruling party it can’t really do anything (unless it wins the next election?) by that time the changes would be a distant memory anyway
“This is a good thing – people are better off – remember rent and home loans (the two big expenses) dont incur GST.”
This is true – but with rate increases…bang goes your tax cuts – and some. The reality is that by the time xmas comes, I suspect the true costs of living will be through the roof – and the tax cuts will count for nothing and all of us will be worse off.
Don’t worry guys, Labour will fix this when they get in. They will put the tax rates back up, and then you’ll be better off again.
Oh. Wait…
Final warning troll – ban next time Trevor
I didnt see Campbell live just the promo. He said he was comparing tax cuts and GST increase, is that all he compared?
I just ask, not to suggest the results werent correct or anything, just because arent there other factors too, petrol tax increases, ets impact and so on?
I wonder why they did this piece I would have thought it has more benefit once people are living the changes, tax cut in pocket, increases in the pocket? Unless Campbell the “avowed socialist” is doing some crazy set up and after they set in he will reveal the facist conspiracy (Just using the corrollary to avowed socialist
) when he revists those families in the reality of the changes?
Did Australia reduce their tax rates to combat the recession? Can someone point me to their changes?
Uh…the issue is not about taxes, although taxes are crucial to running society.
(read this if you have doubts ‘America Goes Dark’ http://www.nytimes.com/2010/08/09/opinion/09krugman.html?src=me&ref=general)
Its about income levels.
Ever wonder why Kiwis move to Oz? Even though you have higher personal tax rates in Oz?
It’s because personal incomes are higher.
By the way, higher taxes on higher personal incomes mean more facilities, benefits and services for citizens. Another reason Kiwis move to Australia.
@Loota: “Uh…the issue is not about taxes”
Yes it is — the whole discussion here is about the trade off between higher GST and lower personal tax rates, and whether it is of net benefit to individuals and families. My point is that although Labour is complaining about this change now, when they come to power, they won’t lower GST, they will just raise taxes. Admittedly, they will only raise taxes on the very weathly, though. Phil Goff indicated in speech earlier this year that only those mega-rich guys, like people supporting their families on a single income of $70k in Auckland, would see a big tax increase.
I understand the importance of tax (hey, it’s required to stop inflation due to printing money
), but it’s still hard to see Labour’s criticism that people are worse off from a net income perspective as fair, when they would be even *worse* off from a net income perspective under Labour. If the argument is that we need to pay more tax to attain or maintain a higher level of service, that’s a perfectly reasonably discussion to have, but it’s a different argument.
Self correction — my comment above is slightly unfair. Goff didn’t say he’d put the top tax rate back at $70k, he said it would be “much higher” than $70k.
http://www.voxy.co.nz/politics/higher-incomes-better-jobs-phil-goff-speech/5/48296
Comments to the Herald later suggest he’s thinking of an $100k threshold:
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10644550
That said, the 2008 manifesto only promised to increase it to $80k. I guess we’ll need to wait for the 2011 manifesto to find out for sure.
H.P. yes this discussion is about tax levels, guess I’m waiting for the discussion to move on to something I care far more dearly about, income levels
If this gst hike is not going to be noticed by the average person,(as noted above) why did it happen? Where is the benefit for the Govt, in this legislation.Although some of you may think 50 cent here or there isn’t much, it might effect your neighbour differently and to suggest not is plain selfish. Fruit and veg free gst is a perfect start to help those who want to help themselves be healthier and help the health system, without taking more off your average joe or the group who feel so hard done by because they work so much harder than him.Jus’ sayin’
Agreed and good on Phil Goff and Labour for suggesting taking GST off fresh fruit and vegetables
Oh yeah! 
!
@Tracey.
It did include ETS as well. It also went on the assumption that things would only rise by 2.5%. I do not believe they will. It will be rounded up to the nearest .99, it also did not include the increase of Childcare.
@Chris The poor couple, Both had been made reduntant. The guy found another job but on less pay. The woman handn’t and she was pregnant from memory. DVD’s and CD’s and things aquired while both working don’t dissapear when you loose your job. Employers don’t come and ransack your house and say “Now you are poor and we have made you reduntant, you cannot have these. You don’t deserve them as only the rich can”
This sort of attitude really annoys me.
What else irritated me is that childcare increases were not included. That is going up too remember.
Aw
Gees. Just read my post. Must have been annoyed. The amount of spelling mistakes must be a new record.
Is the ‘Aw’ due to the spelling mistakes?
Sorry, I’ll leave you alone in future. Spent last night in hospital A and E.
Aw was for sympathy BTW.
Sorry to hear that Spud. I hope you are okay.
. I gathered the ‘Aw’ was sympthay. 
. I like your little comments btw.
Just really don’t think that employers or the govt ransack houses of newly unemployed people (or any people for that matter) Childcare is going up and think that this should have been included in the findings.
Hope you feeling better soon.
Thanks.
“I understand the importance of tax (hey, it’s required to stop inflation due to printing money
), but it’s still hard to see Labour’s criticism that people are worse off from a net income perspective as fair, when they would be even *worse* off from a net income perspective under Labour. If the argument is that we need to pay more tax to attain or maintain a higher level of service, that’s a perfectly reasonably discussion to have, but it’s a different argument.”
@Hayden:
Actually, the economy as a whole is worse off with regressive taxes like GST, because they discourage circulation. Circulation happens through transactions, and a disproportionate amount of the money involved in transactions starts off in the hands of people in much lower income brackets and works its way up. Completely illogically, if the very wealthy (by which I mean less than the top 1% of wealth owners) are exempt to enough taxes, they can actually increase their income over the medium term after a tax hike. But we don’t even need to do that.
Reversing the GST increase is good for the economy if it shifts taxes onto the wealthy, but it’s good for society too if instead the reverse shifts taxes onto pollution generators, low-labour sectors, financial transactions, real estate sales, and/or primary industries that deplete our more limited natural resources. But good luck selling a centrist party like Labour on some of those.